Truth or Dare

Forest Group, Inc. v. Bon Tool Co.

April 5, 2010

Anyone spinning the bottle on a decision to mark their patent on an item known to lack patent protection should first consider the decision in Forest Group, Inc. v. Bon Tool Co. In Forest, the Federal Circuit found that 35 U.S.C. § 292's false marking prohibitions require the imposition of a penalty for each item falsely marked as patented when the requisite intent to deceive exists. The false marking statute's qui tam provision (which allows any member of the public to sue for a false marking violation in return for splitting the fine awarded with the government) helped the court reach its decision. The Forest court found that imposing a penalty for each item falsely marked best effectuates the plain language of the statute and encourages its public enforcement as Congress desired. Now, those who violate the false marking statute's provisions risk exposure of up to $500 for each and every item falsely marked-not your usual basement consequence.

In Forest the patent holders brought an action alleging infringement of a patent covering a type of stilt used in the construction industry. The alleged infringer brought a successful summary judgment motion for non-infringement. The district court then held a bench trial on a counter-claim against the patent holders for false marking. During claim construction, the district court had determined that the patent required the use of a "resiliently lined yoke." However, the stilts marked as patented by the patent holders did not include that element. The patent holders knew their marked products lacked the patented element because they had already lost a separate infringement action due to its absence. Granting summary judgment on the counterclaim, the district court fined the patent holders $500 for their single decision to mark the stilts after they knew the stilts did not meet the claims of the patent.

The alleged infringer appealed, arguing that the statute required a fine for each and every instance of false marking. The Federal Circuit agreed citing the plain language of the statute and the public policy reasons behind its provisions, including the provision allowing qui tam actions. The court said permitting members of the public to sue on behalf of the government helps control false marking. Penalizing false marking on a per decision basis (as argued for by the patent holders) would not provide the financial incentives necessary for plaintiffs to bring those types of suits. The Forest court noted that the statute gives district courts the discretion to impose a penalty of less than $500 per item. It said that courts have the right to assess much smaller fines, particularly in the case of inexpensive, mass produced items. This range of penalties allows district courts to strike a balance between encouraging enforcement of the important public policies behind the false marking statute and imposing disproportionately large penalties

Forest's construction of the statute certainly means we can expect to see more people sitting around the false marking litigation circle. Those contemplating bringing an enforcement action under the statute should weigh a variety of factors before undertaking a challenge. Potential plaintiffs will want to consider the number of items falsely marked, the relative value of the items and the fact that a court cannot exceed a per item penalty of $500 but can establish a per item fine that's much, much less-and only if the requisite knowledge supporting intent to deceive is established.

For patent holders, there's little room to choose. Forest makes clear the risks of falsely marking a patent, especially now that patent holders can expect that their product will be policed by a fresh group of qui tam plaintiffs. Though the Federal Circuit characterized the quantum of proof necessary to show the requisite intent to deceive as "quite high," it also said "that multiple claim constructions or summary judgments are [not] required before the requisite knowledge for false marking can be found." Therefore, some circumstances-like those where the patent holder is unclear about whether their patent covers the marked product-might warrant patent holders getting an opinion of counsel as to whether they are properly marking. They should also reevaluate their products to determine if they are still covered by their patents when they make changes to them and /or if a court has issued an adverse claim construction. Our take? When it comes to marking, patent holders should go for the "Truth"- after Forest, it's easier (and safer) than the dare.

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